Christine Lagarde departs at a moment of peril

Meaning:Phlegmatic describes a person who stays calm and unexcited, even when things get tense; someone who shrugs instead of panics. It can be a compliment (steady, hard to rattle) or a mild complaint (a bit slow to show feeling). The Economist ends with a joke built on a stereotype: a stern message to France about its debts would land best if delivered by a blunt, unflappable Dutch central banker.

Meaning:Transitory means lasting only a short time and then passing away, like a summer thunderstorm or a fad. It is a favourite word of central bankers, who often call a jump in prices transitory when they expect it to fade on its own. Here, the ECB hoped rising inflation would be temporary, so it was slow to raise interest rates; the surge turned out to be longer-lasting than hoped.

Meaning:Jeopardy is danger of loss, harm, or failure; a situation where something valuable could be damaged. If your place on a team is in jeopardy, you might lose it. The article uses it to say Ms Lagarde is leaving just as Europe faces real risk, since France's soaring borrowing costs threaten the stability that the central bank is meant to protect.

Finance. When a government wants money, it sells bonds: IOUs that promise to pay the buyer back later, with interest. The yearly interest rate on a bond is its yield. If investors trust the government, they accept a low yield. If they worry it might not repay, they demand a higher yield as payment for the risk. A higher yield means the government's borrowing is more expensive.

A spread is simply the gap between two yields. In Europe, Germany is the safe benchmark, so people compare each country's yield with Germany's. If German bonds pay 2.5% and French bonds pay 3.5%, the spread is one percentage point. Think of it as a fear gauge: the wider the gap, the more nervous investors are about that country.

This matters for the euro. The euro-zone countries share the European Central Bank, but each borrows separately. Lowering the ECB's main interest rate does little good if a country's own spread jumps and its borrowing costs rise anyway. That is why the ECB stepped in, buying bonds during the pandemic and creating a special tool in 2022, but only for countries that follow sensible budget rules. Now France's spread is back at crisis levels, and the question is whether the ECB should help a country that will not fix its budget.

Economics. Inflation means prices rising across the economy, so each euro or dollar buys less. A little is considered healthy, so most central banks, including the ECB, aim for about 2% a year. That goal is called an inflation target.

The central bank's main lever is its policy interest rate, the rate at which banks borrow from it. When inflation runs hot, it raises the rate. Loans for homes, cars, and businesses get pricier, people and companies spend less, demand cools, and price rises slow. When inflation is too low, it cuts rates to make borrowing cheap and encourage spending. It is like a thermostat for the whole economy, except that the effects arrive slowly, which makes timing hard.

The article shows both sides. In 2019, inflation was just over 1%, below the 2% target. After the pandemic and Russia's invasion of Ukraine, it passed 10% in 2022. The ECB hoped the jump was temporary and waited longer than most banks to act, then raised rates by 4.5 percentage points, and inflation was back near 2% by late 2024. Higher rates, though, also made government debt costlier, which links this idea to the spreads problem.